Representative office of foreign trader in Vietnam: List of 26 frequently asked questions and answers

Date: 5 July 2021

Writers: Quang Nguyen and Linh Nguyen

By this Frequent Questions and Answers, BLawyers Vietnam will introduce you about Representative Office of foreign trader in Vietnam (the “RO”). Our work will provide you an overview of the establishment, operation, personnel and closure of the RO pursuant to the prevailing laws of Vietnam. 

1. What is a Representative Office of foreign trader in Vietnam?

RO is a dependent unit of the foreign trader which is established under Vietnamese law to conduct market survey and some commercial promotion activities under the Vietnamese law.

2. Is it possible for a foreign trader to open more than one RO in Vietnam?

A foreign trader can open more than one RO in Vietnam, however within a territory of a province in Vietnam, there is only one RO of that trader.

3. What are the functions of the RO?

The functions of the RO are conducting liaison activities with clients of the foreign trader, market research, and promotion of the foreign trader’s business.

4. What is the difference between a RO and a foreign trader’s branch?

The main difference is the possibility of directly making profit, namely:

  • The RO cannot perform direct profit-making activities, and its activities are limited to market research and other non-for-profit activities. Thus, it also cannot directly enter into contracts with local companies unless a written power of attorney is obtained.
  • The branch can carry out goods purchase and sale activities and other commercial activities in accordance with the establishment license, thus it can enter into contracts in local companies and is entitled to remit profits abroad.
5. What is the difference between a RO and a foreign trader’s subsidiary?
  • The RO:
    1. The RO is a dependent unit of the foreign trader, for which any operation of the RO is under the foreign trader’s control;
    2. The RO cannot perform direct profit-making activities, and its activities are limited to market research and other non-for-profit activities;
    3. The operation time is within 05 years from the date of issuance and can be extended;
    4. The procedure of opening the RO includes less paperwork with quicker processing time.
  • The subsidiary:
    • The subsidiary of the foreign trader is a separate legal entity from the foreign trader;
    • The subsidiary is established in Vietnam, it is considered a Vietnamese enterprise and has its own rights and obligation to do business in Vietnam (including issuing invoices);
    • The operation time is within 50 years from the date of issuance and can be extended;
    • The procedure of opening the subsidiary include more complex paperwork and longer processing time.

Good read: 03 notable points of Law on Enterprises 2020

6. What are the requirements and conditions for establishing the RO in Vietnam?

To obtain a license for establishment of the RO (the “License”), foreign trader must meet the following requirements:

  1. The foreign trader is incorporated and registers for doing business in accordance with provisions of laws of country or territory, and the country of the foreign trade is a party to treaties to which Vietnam is a signatory or is recognized by that country or territory;
  2. The foreign trader has come into operation for at least 01 year from the date of establishment or registration;
  3. The Certificate of Business Registration or the equivalent document is valid for at least 01 more year from the date of application submission (for documents with an expiration date); and
  4. The scope of operation of the RO is consistent with that in Vietnam’s Commitments to treaties to which Vietnam is a signatory.
7. How long does the License for the operation of the RO last?

The License shall be valid for 05 years from the issuing date but not exceeding the remaining effective period of the foreign trader’s Certificate of Business Registration or the equivalent (for documents with an expiration date).

8. What are the procedures for obtaining the License? How long?

The procedures for obtaining the License are as follows:

  1. Step 1: Submitting the application to the local Department of Industry and Trade (the “Licensing Authority”) where the RO is expected to be located;
  2. Step 2: The Licensing Authority shall check the dossier and request for supplement (if any) within 03 working days;
  3. Step 3: Obtaining the License from the Licensing Authority within 07 working days since the date of receiving the valid dossier.

Estimate time is about 7-10 working days , but could be prolonged to 10-15 working days in fact.

9. What documents foreign trader must prepare for granting the License?

The foreign trader must prepare the following documents:

  1. Application form for License;
  2. Certificate of Incorporation/ Certificate of Business Registration or equivalent documents of the foreign trader;
  3. Audited financial statement of the latest fiscal year;
  4. A letter of appointment of the head of the RO (the “RO Head”);
  5. Passport/ ID card (for Vietnamese) or copy of the passport (for foreigners) of the RO Head; and
  6. An office leasing contract for the RO’s location.

Of note, the trader must notarize and legalize documents issued in overseas for submitting to the Licensing Authority.

10. Which application documents that need to be translated and legalized?
  • The documents are required to be legalized: Documents at Items No. 9 (ii) and 9 (iii); and
  • All documents issued in the home country language must be translated into Vietnamese.
11. After the establishment of the RO, what procedures are necessary for the RO’s official operation?

The RO should proceed the following procedures:

  1. Making and registering a seal of the RO;
  2. Registering a tax code for the RO and the RO Head; and
  3. Opening a bank account of the RO.

Good read: 04 legal questions before replacing the chief of representative office of a foreign entity

12. How to register the seal of the RO?

The RO Head must contact and work with the Provincial Police Department on Administrative Management of Social Order where the RO is located. The RO shall submit the following dossier and receive the result after 03 working days since the date of submission:

  1. An application form;
  2. Power of attorney;
  3. License for the establishment of RO; and
  4. Passport of the RO Head.
13. When the License expired, can the RO extend its validity? How?
  • When the License expired, the foreign trader can request for the extension, unless the Licensing Authority revokes the License by laws. At least 30 days prior to the expiry of the License, the foreign trader shall apply for extension of the License.
  • The procedures for extending the License:
    1. Step 1: Submitting an application to the Licensing Authority where the RO is located;
    2. Step 2: The Licensing Authority shall check the dossier and request for supplement (if any) within 03 working days;
    3. Step 3: Obtaining the renewal License from the Licensing Authority within 05 working days since the date of receiving the valid dossier.

Estimate time is about 05-08 working days, but could be prolonged to 10-12 working days in fact.

14. What are the rights and obligations of the RO Head?

The RO Head has the following rights and obligations:

  1. Be responsible for his/her actions and the operation of the RO within the scope of the foreign trader’s authorization;
  2. Be responsible for his/her activities which is not in the scope of authorization; and
  3. Other rights and obligations stipulate by the laws.
15. Who can be the RO Head?

The RO Head is a person who is appointed by the foreign trader to take responsibility for the operation of the RO. This person can be Vietnamese or a foreigner.

Please note that RO Head cannot concurrently be:

  1. The branch head of the same foreign trader or other foreign trader;
  2. The legal representative of the that foreign trader or other foreign trader;
  3. The legal representative of an enterprise established pursuant to the laws of Vietnam.
16. If the RO Head is a foreigner, what additional license or certificate that he need to obtain for his work at the RO?

In such case, the RO Head need to obtain a work permit (“WP”) in accordance with the Vietnamese Labor Code.

Good read: How to avoid confusion when determining job assignment and working form for applying a work permit in Vietnam?

17. Are there any special requirements of the dossier for obtaining the WP for the foreign RO Head?

To obtain the WP, the RO Head shall prepare some following documents:

  1. The letter of appointment of the RO Head (consular legalization copy);
  2. The health check;
  3. The criminal record.

Before applying dossier for obtaining the WP for the foreign RO Head, an explanation on the RO’s demand of employing the foreign RO Head must be sent to the competent authority to get an approval.

18. Must the RO Head be in Vietnam during the time of setting up the RO?

There is no requirement for the RO Head to be present in Vietnam during the License application period. The RO Head can just authorize to another person to perform on his behalf.

19. Must the RO Head be always present in Vietnam during the operation of the RO?

There is no requirement for the RO Head to be always present in Vietnam during the operation of the RO. When leaving Vietnam to abroad, the RO Head shall authorize to another person in writing (with the permission of the foreign trader) to perform his rights and obligations. However, the RO Head still have to be responsible for the conducting of the authorized person.

If the RO Head is absent from Vietnam for more than 30 days without any authorization, the foreign trader must appoint a new RO Head.

20. Is there any tax obligation that the RO or the RO Head need to fulfill?
  • The tax obligations for the operation of the RO are:
    1. Licensing fee;
    2. Personal income tax (PIT) of the RO Head and employees of the RO;
    3. Value added tax (VAT) when it consumes goods or services from another Vietnamese entity (and receives an accompanying VAT invoice).
  • The tax obligation for the RO Head is PIT.
21. During the operation term, what are the obligations of the RO?

Its obligations include:

  1. Not to directly conduct profit-generating activities in Vietnam;
  2. To conduct commercial promotion activities within the scope permitted by the law;
  3. Not to enter into contracts, not to amend or supplement contracts already entered into by foreign traders, except where RO Head obtain valid letters of authorization from foreign traders or other rights of the RO Head;
  4. To pay taxes, fees and charges, and fulfil other financial obligations provided for by Vietnamese laws;
  5. To report on their operations; and
  6. To have other obligations as defined by Vietnamese laws.

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22. Is it legal for the RO to hire Vietnamese employees directly?

The RO have the right to hire Vietnamese employees directly in accordance with the Vietnamese laws.

23. Does the RO need to register an internal labor rule if using more than 10 employees?

Yes, it does. As the RO is considered as an employer under the prevailing Labor Code, it must register an internal labor rule if using more than 10 employees.

24. Under what circumstances will the License be revoked?

The authorities will revoke the License if the RO:

  1. Being inactive for 01 year and not having any transactions with Licensing Authorities;
  2. Failing to submit reports on the operation of the RO for 02 consecutive years;
  3. Failing to submit reports about its operation when requested by the Licensing Authority within 06 months from the deadline of submission or at the written request of the Licensing Authority; and
  4. Under other provisions of laws.
25. How to close the RO? Which procedures and documents to prepare? What obligations should be fulfilled to employees when the RO is closed?
  • The trader can close the RO operation with the following steps:
    1. Step 1: Announcing the closure of RO operation;
    2. Step 2: Resolving employees’ rights and obligations, liquidate assets, and pay RO’s debts;
    3. Step 3: Completing tax finalization procedures for the RO and the RO Head and notify tax code invalidation;
    4. Step 4: Carrying out the procedures for returning the seal to the Provincial Police Department on Administrative Management of Social Order where registering the seal sample;
    5. Step 5: Completing the procedures for returning the License to the Licensing Authority.
  • Before closing the RO, the RO must pay completely the employees’ wage debt, severance allowance, social insurance, health insurance, and unemployment insurance.
26. If the foreign trader wants to set up a subsidiary in Vietnam and transfer the RO’s employees and assets to that subsidiary, how to proceed?

The trader can consider proceeding as follows:

  1. Step 1: Establishing the subsidiary pursuant to the laws of Vietnam and proceeding post-licensing procedure for its operation.
  2. Step 2: Transferring the RO’s employees and assets to the subsidiary by ways of:
    • The RO terminates labor contracts with its employees. Then, such employees will sign new labor contracts with the subsidiary; and
    • The RO sells/ transfers/ donates its assets to the subsidiary.
  3. Step 3: Closing the RO with the procedures mentioned above.

Good readWhat should foreign investors note when deciding to cease a business in Vietnam?

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

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